PUC ups fine against UGI over fatal Allentown gas blast

Regulators put penalty at maximum $500,000 in closing book on Allentown investigation.

The Public Utility Commission has finalized a settlement with UGI Utilities… (MONICA CABRERA, MORNING…)

January 24, 2013|By Scott Kraus, Of The Morning Call

HARRISBURG — — The Pennsylvania Public Utility Commission on Thursday raised the financial penalty against UGI Utilities to the maximum $500,000 for the February 2011 natural gas explosion in Allentown that killed five people and leveled half a block.

Under the original terms of the settlement, announced in October, UGI was to pay a $386,000 fine and speed up replacement of cast-iron pipes.

Announcing the increased penalty, PUC Chairman Robert F. Powelson had harsh words for UGI for being brought before the commission on allegations of violating gas safety regulations eight times within about the last four years.

"This goes beyond calls for concern; it is downright alarming. This history leads me to one inescapable conclusion: that UGI's management has failed to adequately focus on gas safety issues," Powelson said.

He added that UGI has made "key management changes" since the explosion that he hopes will lead to a new emphasis on safety.

Bob Beard was named UGI Utilities' president and chief executive officer in September 2011, filling a slot left open since 2009 by the departure of Dave Trego. John Walsh, CEO of corporate parent UGI Corp., filled in at the post between 2009 and 2011.

Unless UGI rejects the order within the next five days, it would be made final and would effectively close the book on state regulators' investigation of the fatal blast.

In a statement, the company expressed its sympathies to the families who lost loved ones or homes in the explosion and said it is reviewing the revised settlement.

"UGI has continuously focused on an infrastructure improvement process and has accelerated its replacement of natural gas pipelines made of non-contemporary materials. UGI plans to continue to work collaboratively with the PUC to ensure the safe delivery of energy to UGI's customers and the many communities it serves," the company said.

At the time of the explosion, the maximum fine per incident was $500,000. Lawmakers raised that to $2 million for future violations in 2012, part of legislation that allows gas and other utilities to add a special fee to their bills to finance replacement of pipelines and other infrastructure.

Commissioner Wayne Gardner said there is no reason UGI shouldn't be able to make significant progress replacing its aging cast-iron gas distribution lines in the coming years. The company enjoys healthy finances, has a state regulator that wants the pipes replaced and the opportunity to file for a distribution-system improvement charge to cover the costs after two years.

"UGI has no excuse for not making the replacement of 'at risk' pipe its No. 1 priority," Gardner said.

Other provisions of the initial settlement remain in place, including a pledge by UGI to replace all 451 miles of its aging, cast-iron pipes — the type of distribution line implicated in the blast — by 2027. The company would have to replace 1,313 miles of bare steel pipe by 2043.

Immediately after the fatal explosion, UGI officials said that under the company's existing replacement plan, it would take until 2051 to remove all the cast-iron pipes in its coverage area.

It's not the first time UGI, based in Reading, has agreed to accelerate replacement of its cast-iron pipes, some of which are a century old. Last May, after PUC auditors said the company had taken a "passive approach" to the work, UGI agreed to cut its replacement timeline in half to 20 years. Thursday's settlement would reduce that to 14 years.

When they filed the complaint over the Allentown gas explosion last June, PUC investigators sought to force the utility to replace all its cast-iron lines within 10 years. UGI responded in legal documents that 10 years was unrealistic.

Under the settlement, UGI is required to file periodic reports updating its pipeline replacement progress.

UGI also agreed to improve the process it uses to infuse its gas with an odor that helps customers detect leaks. PUC investigators cited poor odorization practices in their initial complaint against UGI.

The commission added two other requirements to the settlement Thursday, ordering UGI to implement a pilot program to enhance leak detection procedures throughout Allentown, and to file a distribution integrity management plan to account for accelerated pipeline replacement.

Allentown Mayor Ed Pawlowski said he would have liked to see the agency hold UGI to the regulators' original demand that the utility replace all the cast-iron pipelines within the decade, rather than the 14 years allowed in the settlement. The danger of another gas explosion still "keeps me up at night," he said.

A similar request to shorten the timeline was made by Manuel Cruz, who lost his mother, daughter and 4-month-old grandson in the explosion.